Imagine a warehouse free of stagnant overstock, where inventory flows efficiently to meet market demand and capital circulates seamlessly. This is the reality Duluth Trading Co. has achieved through strategic inventory optimization. Here’s how the retailer turned inventory pressure into a catalyst for profitability.
Strategic Shift: From "Everything Everywhere" to "Less But Better"
Duluth Trading recognized that bloated product assortments diluted resources and increased carrying costs. The company launched an aggressive SKU reduction plan, targeting a 20% cut for spring/summer 2026 collections, with double-digit reductions continuing into fall/winter. This disciplined approach allowed sharper focus on core products and cleaner merchandise planning.
Lean Operations: Precision Inventory Control
Beyond SKU trimming, Duluth implemented rigorous inventory management protocols:
- Demand-aligned receiving schedules to prevent overstocking
- Enhanced enterprise planning for streamlined operations
- Optimized distribution to improve product availability
The results were immediate: Q3 2025 saw inventory levels drop 17% year-over-year. CEO Stephanie Pugliese noted these efforts would drive "higher inventory turns, improved cash utilization, and expanded margins" through clearer product focus.
Automation Advantage: The Georgia Distribution Hub
The retailer's $40 million Adairsville, Georgia automated fulfillment center now handles over 60% of orders—a 20% year-over-year increase. CFO Neala Agrawal confirmed the facility boosted store inventory levels by 300 basis points while maximizing throughput efficiency.
Data-Driven Allocation: Stocking What Sells
Duluth leverages analytics to dynamically adjust store-level inventory, prioritizing high-velocity SKUs. "We've elevated minimum presentation levels and increased replenishment for top performers," Agrawal explained. This granular approach ensures optimal product availability across all locations.
The Bottom Line Impact
The inventory strategy delivered tangible financial benefits:
- Q3 2025 inventory reduced by $39 million to $192 million
- Followed a 12% reduction in Q2
- Improved working capital and operating margins
Pugliese emphasized the company's commitment to "inventory discipline and Duluth's core product strengths" through 2026. The case demonstrates how holistic inventory optimization—combining assortment refinement, operational rigor, and technological investment—can transform supply chains into competitive advantages.